Farms across the Midwest are struggling financially, leaving many to wonder why.
An alarming number of farms have filed for Chapter 12 bankruptcy, and the number continues to rise steadily. Farmers are choosing to file for Chapter 12 bankruptcy because it allows high debt levels like Chapter 11 bankruptcies, but is also an easier process, similar to Chapter 13 bankruptcies.
Farming financial hardships
So far, 84 farms filed across the states of Montana, Minnesota, Wisconsin, North Dakota and South Dakota. These filings occurred within a one-year period, from May 2017 to June 2018.
Not only are bankruptcies trending upward amongst farmers, but rates of farmers falling behind on payments is also rising.
After researching all the numbers, analysts have predicted that these financially tough time for farmers are unfortunately going to continue to climb.
They don’t see an end in sight.
Reasons for the farming bankruptcy climb
Why is this happening in the farming industry?
One issue points toward overproduction. Farmers are actually producing more than is being demanded, especially for soybeans and corn.
For dairy farmers, one of the culprits is the trend toward alternate forms of milk, like almond or rice. This trend is commonly due to health complications with dairy milk. Also, many Americans are choosing a vegan lifestyle and avoiding all dairy products.
The other reason for the financial problems farmers are facing is the ongoing trade war between the U.S. and China. The imposed tariffs are hurting the soybean, milk and pork industries most.
Guidance through the hardship
Agricultural bankers are trying to help their customers navigate these difficult times by offering options for making adjustments to their farming operations.
Some of these include selling land or machinery. If the farmers are renting land, paying less for rent or giving up the rented land may be necessary.
As hard as these actions may be for the farmers, it’s all in an effort to increase their working capital and keep their operations going.
This trend of farming bankruptcy follows a 2017 trend of retail companies declaring bankruptcy.
